My First Year Battling Obamacare
Most people are by now familiar with the broad strokes of the lawsuits challenging Obamacare: more than 30 cases around the country allege, among other claims, that the federal government lacks the constitutional authority to require people to buy a product (the individual health insurance mandate)—and the only way to avoid the mandate is to become poor. After decisions going both ways in the district courts, we are now at the appellate stage in five of those suits, including Virginia’s and the Florida-led 26-state effort.
Those who follow developments in constitutional law are also familiar with the broad legal arguments being made: that the power to regulate interstate commerce, even when read in the context of the power to make laws that are necessary and proper to executing that specified commerce power, does not include the power to force someone to engage in economic activity—to create, in effect, the commerce being regulated. Not even during the height of the New Deal did the government require this, and there are no parallels in the Civil Rights Era or since. (And also that Congress can’t do this under the taxing power for various reasons that I won’t go into here; even those courts ruling for the government have rejected the taxing power assertion.)
Finally, those who follow Cato are probably aware that I’ve been spending a good part of my time since Obamacare’s enactment in March 2010 in this area: filing briefs, writing articles, debating around the country, appearing in the media. And I’m not alone; our entire Center for Constitutional Studies has been involved in various capacities. Indeed, Cato Chairman Bob Levy himself produced a very useful Primer for Nonlawyers about what is the clearly the central constitutional and public policy debate of our generation.
Well, if anyone cares to peek beyond the curtain of how Cato’s legal efforts against Obamacare have evolved, I have an article on that forthcoming in the Florida International University Law Review. Here’s the abstract:
This article chronicles the (first) year I spent opposing the constitutionality of Obamacare: Between debates, briefs, op-eds, blogging, testimony, and media, I have spent well over half of my time since the legislation’s enactment on attacking Congress’s breathtaking assertion of federal power in this context. Braving transportation snafus, snowstorms, and Eliot Spitzer, it’s been an interesting ride. And so, weaving legal arguments into first-person narrative, I hope to add a unique perspective to an important debate that goes to the heart of this nation’s founding principles. The individual mandate is Obamacare’s highest-profile and perhaps most egregious constitutional violation because the Supreme Court has never allowed – Congress has never claimed – the power to require people to engage in economic activity. If it is allowed to stand, then no principled limits on federal power remain. But it doesn’t have to be this way; as the various cases wend their way to an eventual date at the Supreme Court, I will be with them, keeping the government honest in court and the debate alive in the public eye.
Read the whole thing, titled “A Long Strange Trip: My First Year Challenging the Constitutionality of Obamacare.”
Romney Can Run, but He Can’t Hide from Romneycare
Massachusetts Governor Mitt Romney announces today that he will be a candidate for president. His announcement is expected to tout his business experience and to portray him as the candidate best able to deal with the country’s economic problems. But one thing you are not likely to hear him talk about is his Massachusetts health plan, Romneycare.
Of course, Romney has already tried to put this issue away with a speech in Detroit last month, and he would probably be happy to never talk about it again. But if Romney really believes he can hide from the Romneycare fallout, he is badly mistaken.
Cato scholars have issued several reports detailing the many failings of Romneycare. Those studies can be found here , here , here and here for instance.
In his Detroit speech, Romney trotted out three defenses. First, he says that his plan, unlike Obamacare, did not increase taxes. That is technically true — if you consider only the legislation as Romney signed it. However, it is also true that the legislation relied heavily on federal subsidies — more than $300 million — and was still underfunded. Romney’s successor was forced both to cut back on some benefits that the plan originally offered and to raise the state’s cigarette tax by $1 per pack ($154 million annually) to help pay for the program. The state also imposed approximately $89 million in fees and assessments on health-care providers and insurers.
Similarly, Romney claims that his plan only costs about one percent of the Massachusetts budget and is, therefore, not a budget-busting, big government program. In making this claim, however, Romney fails to note that that accounting does not take into account more than $300 million annually in federal funds. Nor does it count the costs that were pushed off onto Massachusetts businesses and taxpayers through the individual and employer mandates, or the costs of increased insurance premiums.
And, finally, Romney criticizes Obamacare as a “one size fits all” federal plan, whereas his plan was implemented in only one state. That’s true. Governor Romney only messed up the health-care system in Massachusetts, while President Obama has messed up health care for the entire country. Of course, as governor, Romney didn’t have the power to impose his model outside of his state. He now says that he opposes any national plan, calling for states to experiment with different approaches as the “laboratories of democracy.” That would certainly be an improvement over Obamacare. On the other hand, he has repeatedly said that he sees the Massachusetts plan as a model for the nation and has urged other states to copy his approach.
Governor Romney faces many challenges in convincing voters that he really does want to reduce the size, cost, and intrusiveness of government. For example, Romney has recently been pandering to Iowa voters by renewing his support for ethanol subsidies. On other issues, he has been a big supporter of federal involvement in education. He backed No Child Left Behind and once called for the federal government to buy a laptop computer for every child born in America. His record as Massachusetts governor was decidedly mixed. In the Cato Institute’s biannual ranking of governors on fiscal issues, Romney received a grade of only “C.” His philosophy of governing can be seen from his comment, “I’d be embarrassed if I didn’t always ask for federal money whenever I got the chance.”
But the biggest single obstacle to his candidacy remains Romneycare. Unless and until he finds a way to deal with this albatross, he will be a weak and wounded frontrunner.
Who’s Right on Medicare Reform, Ryan and Rivlin or Obama and Gingrich?
This new video, narrated by yours truly, discusses a proposal to solve Medicare’s bankrupt finances by replacing an unsustainable entitlement with a “premium-support” system for private insurance, also known as vouchers.
This topic is very hot right now, in part because Medicare reform is included in the budget approved by House Republicans, but also because Newt Gingrich inexplicably has decided to echo White House talking points by attacking Congressman Ryan’s voucher plan.
Drawing considerably from the work of Michael Cannon, the video has two sections. The first part reviews Congressman Ryan’s proposal and notes that it is based on a plan put together with Alice Rivlin, who served as Director of the Office of Management and Budget under Bill Clinton. Among serious budget people (as opposed to the hacks on Capitol Hill), this is an important sign of bipartisan support.
The video also notes that the “voucher” proposal is actually very similar to the plan that is used by Members of Congress and their staff. This is a selling point that proponents should emphasize since most Americans realize that lawmakers would never subject themselves to something that didn’t work.
The second part discusses the economics of the health care sector, and explains the critical need to address the third-party payer crisis. More specifically, 88 percent of every health care dollar in America is paid for by someone other than the consumer. People do pay huge amounts for health care, to be sure, but not at the point of delivery. Instead, they pay high tax burdens and have huge shares of their compensation diverted to pay for insurance policies.
I’ve explained before that this inefficient system causes spiraling costs and bureaucratic inefficiency because it erodes any incentive to be a smart shopper when buying health care services (much as it’s difficult to maintain a good diet by pre-paying for a year of dining at all-you-can-eat restaurants). In other words, government intervention has largely eroded market forces in health care. And this was true even before Obamacare was enacted.
Medicare reform, by itself, won’t solve the third-party payer problem, but it could be part of the solution – especially if seniors used their vouchers to purchase real insurance (i.e., for large, unexpected expenses) rather than the inefficient pre-paid health plans that are so prevalent today.
Obama Admin. Repeats Discredited Cost-Shifting Claim in Federal Court
Defending ObamaCare in federal court yesterday, the Obama administration’s acting solicitor general, Neal K. Katyal, peddled the widely discredited claim that the uninsured increase your and my health insurance premiums by $1,000:
“When people self-finance their health care,” Katyal contended, “that raises the cost of health care overall by $43 billion a year, and that raises the average family’s premiums by $1,000 a year. That will price untold numbers of people out of the market.”
That estimate comes from two left-wing groups, Families USA and the Center for American Progress Action Fund.
When President Obama himself made this claim, FactCheck.org reported:
[Obama] said ”the average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance.” That’s from a recent report by Families USA, a group that lobbies for expanded government coverage. But another study for the authoritative Kaiser Family Foundation thinks that figure is far too high.
Serendipitously, the same day that Kaytal was repeating this discredited claim in federal court, USA Today reported:
Jack Hadley, senior health services researcher at George Mason University in Fairfax, Va…has found that privately insured individuals don’t end up paying higher premiums to make up for the uninsured because hospitals that serve lower-income families don’t have a lot of patients with insurance. He said the government pays about 75% of those unpaid hospital bills either by direct payment or through a disproportionate payment of Medicaid. (emphasis added)
Filed under: Cato Publications; General; Government and Politics; Health Care
HHS Plays Chicken Little — Again
USA Today reports on a new Obama administration study:
On average, uninsured families can pay only about 12% of their hospital bills in full. Families with incomes above 400% of the poverty level, or about $88,000 a year for a family of four, pay about 37% of their hospital bills in full, according to the Department of Health and Human Services study.
Oy, where to begin?
This is pre-existing conditions all over again. In the hope of saving ObamaCare from the gallows, the Obama administration is blowing a real but relatively small problem way out of proportion.
The best data indicate that the problem of the uninsured not being able to pay their medical bills is real but relatively small. “Uncompensated care” for the uninsured accounts for just 2.8 percent of health care spending. To put that in perspective, 30 percent of Medicare spending is pure waste, according to the Dartmouth Atlas. Moreover, studies show that the uninsured who do pay their bills pay so much more than private insurance does that they more than make up for the uninsured who don’t pay their bills. That is, total uncompensated care may be negative.
This HHS report adds nothing to our understanding of this problem. Everyone already knows that nearly everybody would have a hard time paying an expensive hospital bill if they didn’t have health insurance.
In fact, this report detracts from our understanding of the problem. It essentially says that if all uninsured people were to experience a hospitalization, only some of them would be able to pay the entire bill for some hospitalizations—not necessarily their own hospitalization—with their liquid assets. That’s as non-illuminating as saying that very few “D” students could afford to pay four years of college tuition (say, $100,000) with the money in their bank account:
- Just like few “D” students are headed to college, very few of the uninsured are going to be hospitalized. Not only are most of the uninsured young and healthy, but most of them buy insurance as they get older.
- The “D” students who do go to college probably won’t be attending the most expensive colleges. Likewise, the uninsured who are hospitalized are likely to have relatively less-expensive episodes of care.
- Of the “D” students who attend college, some would be able to pay for some of their tuition from their bank accounts. But rather than tell us how much of these hypothetical medical bills the uninsured could pay, HHS reports the number that would be unable to pay these hypothetical medical bills “in full,” and that total billings for those hypothetical hospitalizations—not the unpaid amount—account for 95 percent of medical care provided to the uninsured.
- Some of those “D” students could obtain student loans and pay off their tuition over time. Likewise, some of the uninsured will be able to borrow money or sell their houses or cars to pay their medical bills. But HHS doesn’t account for the ability of the uninsured to borrow, nor does it count their ability to tap non-financial assets like cars and houses.
In short, HHS bent over backward to make this problem appear bigger than it is. Moreover, they couched their misleading findings in ways that lent themselves to even greater exaggeration. For example, the above quote from USA Today,
uninsured families can pay only about 12% of their hospital bills in full.
paints a far darker picture than what HHS actually found:
On average, uninsured families can only afford to pay in full for about 12% of the admissions to hospital (hospitalizations) they might experience. [Emphasis added.]
It’s almost as if HHS was hoping reporters would misreport their findings in a way that made the problem sound worse.
Filed under: Cato Publications; General; Government and Politics; Health Care
Yes, Says Virginia, There Are Limits on Federal Power
Today, the Fourth Circuit became the first appellate court in the nation to enter the Obamacare fray. It heard two very similar cases back-to-back, Liberty University’s, in which the government won in the district court, and the Commonwealth of Virginia’s, in which Judge Henry Hudson struck down the individual mandate back in December. Going into the hearing, Virginia Attorney General Ken Cuccinelli’s legal team had done a wonderful job setting out the reasons why Hudson was correct and why Congress went too far in asserting the unprecedented power to compel people to enter into contracts with private insurance companies. I was proud to sign Cato’s brief supporting that position and continue to maintain that the federal government cannot require people to buy goods or services under the guise of regulating interstate commerce. Moreover, the individual mandate is the linchpin of the overall legislative scheme (as everyone concedes), so if it falls, the rest of the law—at least its central provisions—must fall with it.
Indeed, the Fourth Circuit judges—a Clinton appointee and two Obama appointees, in a random selection unfortunate to the challengers—struggled with the idea that Congress could regulate “inactivity.” The government—which has now determined that the challenges are so serious as to send the solicitor general to argue in lower courts—claimed that Congress can do anything it wants relating to anything that in any way affects a national market such as that for health care. Given that decisions not to buy insurance, or to self-insure, or not to pay for health care until presented with a bill, clearly have a substantial effect on interstate commerce, the argument went, Congress can require people to buy health insurance. The judges seemed to agree to a certain extent but were still troubled by the textual truism that a power to “regulate” implies an active object or activity that is being regulated. And indeed, if a “decision” not to buy something or the state of not having acquired something is all that is required to invoke congressional jurisdiction, then the Constitution’s enumerations of federal power mean absolutely nothing.
The government is understandably unconcerned with articulating a principled limit on its own power, and this particular panel of judges may find some way to avoid dealing with the activity/inactivity conundrum, but one can only hope that the Supreme Court ultimately rejects the claim that Congress can grant itself unlimited power simply by legislating in an area of great national concern.
Starting at 2pm Eastern, you can stream the oral arguments from the Court’s website here.
Inside Every Leftist Is a Little Authoritarian Dying to Get Out
I’ve been meaning to write about how ObamaCare’s unelected rationing board — innocuously titled the Independent Payment Advisory Board — is yet another example of the Left leading America down the road to serfdom. (Efforts to limit political speech — innocuously called “campaign finance reform” — are another.)
As Friedrich Hayek explained in The Road to Serfdom (1944), when democracies allow government to direct economic activity, the inevitable failures lead to calls for a more authoritarian form of governance:
Parliaments come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be taken “out of politics” and placed in the hands of experts — permanent officials or independent autonomous bodies.
The problem is well known to socialists. It will soon be half a century since the Webbs began to complain of “the increased incapacity of the House of Commons to cope with its work.”
Sound familiar? National Review‘s Rich Lowry picks up on the theme here.
Making this connection got a lot easier the other day when the University of Chicago’s Harold Pollack, a leading advocate of a “public option,” vented his frustrations over at The American Prospect blog about how Congress is likely to defang the Independent Payment Advisory Board. And he ends up just where Hayek predicted:
Despite many reasons for caution — the words George W. Bush foremost among them — I’m becoming more of a believer in an imperial presidency in domestic policy. Congress seems too screwed up and fragmented to address our most pressing problems.
This isn’t how it starts. This is how it snowballs.
Paging Dr. Hayek…
When Too Much Money’s the Problem…
Last Friday’s PBS NewsHour included a debate between NYT columnist David Brooks and WaPo columnist Ruth Marcus on the budget fights on Capitol Hill. Marcus was sitting in for NewsHour regular Mark Shields, whose comments I find thoughtful and worth contemplating. Unfortunately, on Friday Marcus didn’t meet Shield’s standard.
In discussing House Budget Committee chair Paul Ryan’s proposal that Medicaid be converted to a block grant program with the states taking a broader administrative role, Marcus offers:
RUTH MARCUS: The cuts in here are so dramatic. They are so painful. And they — and many of them are focused — I know this is not his intention, but he turns, for example, Medicaid, which is the health-care program for poor people, into a block grant. You give it to states.
But then it just doesn’t grow enough to deal with the increase in health-care costs. Well, what happens to these people?
Is she serious!?
Marcus seems not to understand that government subsidies to health care consumption, in the form of such programs as Medicare and Medicaid as well as employer tax exclusions for health insurance benefits, contribute to the rapid growth in health care costs. That is, by flooding the health care market with government money, the market ends up with many dollars chasing few worthwhile health care products, which results in rising health care prices. Moreover, the subsidies siphon away health care resources from the private-payer health care market, causing cost in that sector to increase rapidly as well.
Subsidies aren’t the only government policies contributing to rising health care costs. Government restrictions on the supply of health care services also play a role. Among those supply restrictions are the ban on drug importation, a very costly and difficult new-drug testing regime, and unnecessarily restrictive licensing of health care professionals.
The rapid rise in health care costs is primarily the consequence of government policies. For Marcus to say that we should maintain the current subsidy system for health care because, without it, Medicaid patients won’t be able to keep up with health care cost increases is … well … not very good commentary.
Obamacare Ruling Expected, Correct
Judge Vinson’s ruling today that Obamacare’s individual mandate is unconstitutional, following on the heels of Judge Hudson’s similar ruling in the Fourth Circuit, should give the new Congress all the confidence it needs to rescind this provision and more. Indeed, the idea that government could order a person to buy a product from a private vendor, or be fined for failing to do so, is so foreign to our Constitution for limited government that it’s a wonder that Congress ever imagined it had such a power to begin with.
The Congress that passed Obamacare is now gone. It will be an early test for members of the new Congress, including those many Senate Democrats up for reelection in 2012, whether they will study these well-reasoned opinions and come to a better understanding of the constitutional limits on their power. There are far better, more constitutional ways to enable Americans to obtain health care than through the massive government intrusion into the healthcare market that Obamacare ordered. There is nothing quite like a little freedom to enable Americans to solve their own problems.
Obamacare Suffers Another Legal Blow
Yes, Speaker Pelosi, the constitutional concerns people have with the health care legislation you rammed through Congress despite overwhelmingly negative public opinion are serious. The Florida court’s ruling, denying the government’s motion to dismiss the challenge to the new health care law brought by 20 states and the National Federation of Independent Business, mirrors the one we saw in July in Virginia’s separate lawsuit. These have been the most thoroughly briefed and argued lawsuits, so these significant and lengthy opinions conclusively establish that the constitutional concerns raised by the individual mandate and other provisions are serious. Nobody can ever again suggest with a straight face that the legal claims are frivolous or mere political gamesmanship.
And that should come as no surprise to those who have been following the litigation because the new law is unprecedented — quite literally, without legal precedent — both in its regulatory scope and its expansion of federal authority. Never before have courts had to consider such a breathtaking assertion of raw federal power — not even during the height of the New Deal. “While the novel and unprecedented nature of the individual mandate does not automatically render it unconstitutional,” Judge Vinson observed, “there is perhaps a presumption that it is.”
This means at the very least that “the plaintiffs have most definitely stated a plausible claim with respect to this cause of action.”
Just so — and the deliberate consideration that these district courts are giving to these serious constitutional arguments (unlike the Michigan judge’s perfunctory treatment last week) indicates that the probability that the Supreme Court will ultimately strike down the individual mandate continues to increase.
Pelosi: ObamaCare Helps Artists Avoid Hassle of Working
ObamaCare creates incentives not to climb the economic ladder. It also creates incentives not to work at all; able-bodied people can quit their jobs, safe in the knowledge that the suckers working man will foot the bill for any health care they may need. House Speaker Nancy Pelosi thinks that’s a not a bug, but a feature of the new law, at least if those able-bodied non-paycheck earners are artists. (HT: CNS News.)
Repeal the bill.
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